What Will the President Do When His Policies Fail?

by Burt on October 27, 2009

The main problem with massive government intervention into the economy is that it produces more stagnation than growth. Thus, when the massive intervention fails to reduce unemployment or stimulate economic growth in the long term, the leaders must come up with explanations for the failure. Few of us are candid enough to admit we failed; we like to find others to blame. Thus, the search for scapegoats is almost inevitable. The question, then, is what will Obama do when his policies fail?

I discuss this question at length in the November issue of The American Spectator and on Thursdays regularly with Rusty Humphries, an excellent talk radio host. The recent attacks by various members of the Obama administration (and even Obama himself at one point) on FOX News and talk radio suggest the possible direction of future criticism.

Let’s turn to history, especially FDR, to look for clues on how leaders have scapegoated economic disaster. When FDR, after launching the New Deal, faced persistently high unemployment and economic stagnation he had three responses. The first response, which I will discuss today, is that he used businessmen as a scapegoat for supposedly thwarting recovery. With high tax rates on income, corporations, and even the undistributed profits of corporations, most businessmen refused to risk their capital. FDR denounced them, and even used the IRS against some of them (former Treasury Secretary Andrew Mellon in particular).

President Obama has already adopted this scapegoat approach, but he is only at the criticism stage right now. He started with President Bush, the alleged source of most economic trouble, and then, like FDR, shifted to businessmen. They were allegedly benefiting from tax cuts and their salaries were outrageous. With health care, Obama switched to insurance companies who were supposedly ripping off consumers. Doctors as well, the president insisted, were removing tonsils and unnecessarily cutting off feet for loads of cash.

Recently, we have seen presidential advisors criticizing insurance companies and also the Chamber of Commerce for opposing his health care reform–and thus the president’s vision for economic recovery. Interestingly, FDR also attacked the Chamber of Commerce and his motives for doing so were described by his speechwriter Ray Moley. According to Moley, in conversation FDR “launched into a denunciation of bankers and business men and said that every time they made an attack on him, as they did in the Chamber of Commerce of the U. S., he gained votes and that the result of carrying on this sort of warfare was to bring the people to his support.”

Let’s hope that the ebb and flow of criticism from the Obama administration stays at the speech stage and does not escalate to the repression stage as it sometimes did with FDR. With IRS audits and radio license renewal problems for political foes, FDR carried the debate from the “I disagree with you” stage to the “I’m shutting you down” stage. Our Founders recognized the possibility of that second stage and wrote the First Amendment loud and clear to try to prevent that from happening in the United States.

Welcome to BurtFolsom.com! I hope you find the ideas on this blog thought provoking and useful. Please subscribe to free email updates by clicking HERE